UPDATE - House passes production tax credits for hydro

The House passed a bill May 21 that would extend expiring production tax credits for renewable energy, including hydropower, and authorize another $2 billion for Clean Renewable Energy Bonds.

The bill passed 263-160, largely along party lines. Of those voting for passage, there were 228 Democrats and 35 Republicans. One Democrat and 159 Republicans voted against it. Twelve other members were present but did not vote.

The House acted less than a week after the House Ways and Means Committee marked up the Energy and Tax Extenders Act of 2008, H.R.6049. (HNN 5/15/08) The bill, now called the Renewable Energy and Job Creation Act of 2008, would extend expiring production tax credits for a list of renewables.

The House bill includes a three-year extension -- from Dec. 31, 2008, through Dec. 31, 2011 -- for "incremental" hydro: efficiency improvements or capacity additions to existing hydro projects, and the addition of hydropower generation to existing non-hydropower water resources facilities. It also includes irrigation hydropower of less that 5 MW.

The bill would add ocean, tidal, in-stream hydrokinetic, and conduit waterpower technologies to the list of renewables eligible for production tax credits.

The $2 billion authorization for clean energy bonds would be divided equally among groups ineligible for production tax credits: state, local, and tribal governments; public power utilities; and electric cooperatives.

The bill now goes to the Senate, which is considering another version of legislation that would extend incentives for renewables. That measure includes a one-year extension of the in-service date of renewable energy projects eligible for the PTC and $400 million in extra bonding authority for the CREB program.

Bill removes disincentive to powering non-hydro dams

The House bill modifies the existing definition of incremental hydropower to make it more feasible for developers to add generating units to non-hydro dams. The National Hydropower Association collaborated with environmental groups, including American Rivers and Trout Unlimited, to propose the new language.

The Energy Policy Act of 2005 said turbines could be added to non-hydro dams but only �if there is not any enlargement of the diversion structure, or construction or enlargement of a bypass channel, or the impoundment or any withholding of any additional water from the natural stream channel.� Developers found, as a practical matter, the language prevented them from modifying non-hydro dams.

The bill would strike that text and declare that hydroelectric projects built at non-hydro dams must be operated to maintain the same water surface elevation as would have occurred in the absence of the generating units. NHA said the new language looks less at how a project must be constructed and more at how a project is operated.

Bill avoids deleting oil company tax incentives

The bill would offset federal revenue losses from the incentives by closing a tax loophole that allows individuals that work for certain offshore corporations, such as hedge fund managers, to defer taxes on their compensation. It also would delay the effective date of a tax benefit for multinational corporations operating outside the U.S.

The bill avoids trying to repeal $18 billion in tax incentives for oil company investments to pay for the renewables programs. The Senate refused to pass the renewables incentives several times due to the proposed oil company tax hike.

The production tax credits and Clean Renewable Energy Bonds are among almost $20 billion of tax incentives the bill would provide for investment in renewable energy, carbon capture, and sequestration demonstration projects, energy efficiency, and conservation. The bill also would extend $27 billion in non-energy-related tax breaks.